House Flipping Part 1

Thanks to the improved real-estate market, house flipping has made a comeback, both across the nation and, to a degree, in Colorado. House flipping is, essentially buying a house or property with the intent to sell it for a profit. Daren Blomquist, a vice president at RealtyTrac, said house flipping in Colorado was down 17 percent for the first six months of this year compared with the first six months of 2011. The year before, however, flipping in Colorado rose 28 percent. For the first six months of this year, 4,497 houses were flipped in Colorado, for an average gross profit of $7,522, well below the national average of $29,342. On average, it took 122 days to flip a house in the state, compared with the national average of 106. Among metro areas across the country, Denver-Aurora ranked eighth in the number of flips over the first half of this year with 2,714. Phoenix was No. 1 at 9,182. The average gross profit in Denver was $7,732. Colorado Springs ranked 33rd nationally in number of flips at 634. Although that total was down 25 percent from the first half of 2011, the average gross profit was a robust $30,403.

Flipping can provide benefits to the property, neighborhood and community. It gets foreclosures off the market; the homes are being repaired and remodeled; and the homes are returned to the market for fair market value. However, it is a business of hits and misses, and the logistics can get pretty complicated. There are many decisions to make from the beginning. Where should you buy? If you buy a house in an up-and-coming neighborhood, you’re banking on the neighborhood increasing in value. If you decide to buy in a new development, you’ll want to attract higher-end home buyers who want the luxury features and space offered in the suburbs. If all goes well, you could make a profit, but if something goes wrong (faulty budgeting, timing issues, a crime spike in that up-and-coming neighborhood), you could be stuck with a house you can’t get rid of. Once you know where you want to buy, the next step is deciding what type of property you want. If you go for a fixer-upper, you’re committing to improving the home, which takes time and money. If you buy a foreclosed property in an auction or from a bank, you could get a bargain on a vastly underpriced house. It’s good to keep in mind however that if the previous owners couldn’t pay the mortgage, they probably couldn’t pay for the upkeep either. Be prepared to possibly have to deal with a rodent infestation or a leaky roof. Spending too much on repairs or on the property itself means losing money, as does choosing the wrong finishes or general contractor.


 
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